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The USDA report, released after the close held a slightly bullish tilt to expectations but traders were hoping for a bullish surprise and the report showed a few more market-ready hogs than expected. As a result, the new buying might come in to the April and June contracts while long liquidation could pressure the February. All Hogs and Pigs as of December 1st come in at 97.8% of a year ago as compared with trade estimates near 99% of last year and some estimates as high as 102%. The total was 6.7% above the 2006 level. Kept for breeding supply was 97.6% as compared with pre-report trade estimates near 96.5% of last year. Kept for market animals came in at 97.9% of last year as compared with the trade estimates near 99.25% of last year. The weight breakdown showed heavier weight animals (180 pounds and above) at 99.6% of last year and these animals are already mostly through the pipeline. For the next several weeks, the market will go through the 120-179 pound category which showed a supply which is 100.5% over last year which was about 2% above trade expectations. As a result, the report is more positive to the spring and summer month contracts where the weight breakdown shows a much smaller supply. The “under 60 pound” category came in at 94.5% of last year vs. trade estimates near 96%. The market pushed moderately higher on the session yesterday with short-covering ahead of the report helping to support. The market chopped around unchanged early in the day but a lack of new selling interest and ideas that the supply of all meats will decline in the weeks and months ahead helped to support. Rumors that the US and Russia may be coming to an agreement to see increased Russian imports of US pork in 2009 helped to provide some support as well. Cash hogs were steady as compared with a steady to lower call and this may have helped support as many traders see ham prices recovering quickly as more plants are approved for Mexico trade. Of the 30 plants suspended, 20 were brought back on line. The CME Lean Hog Index as of December 26 came in at 52.50, down 77 cents from the previous session and down from 54.62 the week before. The estimated hogs slaughter came in at 435,000 head yesterday. This brings the total for the week so far to 866,000 head, down from 869,000 last week at this time but up from 375,000 a year ago. Pork cut out values, released after the close yesterday, came in at $54.49, down 26 cents from Monday and down from $57.92 the previous week.
TODAY’S GUIDANCE: Weakness in pork cut-out values overnight and a slightly larger upfront supply could keep the short-term trend down.
